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How to access USD outside the USA as an hedge?

USD outside US

Most Americans don’t realize what they have. This is because most of the world has to work for the things that are given to Americans without asking. 

Freedoms, safety, access to vast lands, affordable loans, ability to migrate to any State within the US and not to have to worry about language, are some things that come to mind. 

I am not saying any of these are perfect in the US, we know they are not, but they are there. For instance, there is wrongdoing but then there is a system that works when you seek help. There is crime but then there is 911 that works. There is discrimination but there is ‘freedom’ to question it.

Point is, there are a lot of things that are unique to the US that may not be perfect but they are still better than most parts of the world.

One such thing is the US Dollar. 

It is fiat so it’s not perfect. Like all the fiat systems that preceded it, it will one day fail unless replaced by a new sham.  

However, I believe it will be the last fiat to fail. This means that the US Dollar can act as a currency safe-haven.

Advantages of holding the USD vs. other fiat

We are big proponents of Bitcoin and cryptocurrencies. However, until cryptos become the staple money people need an intermediary medium to hold their money. We think the US Dollar can play that role while we wait for the transition.

Safehaven

I know friends in Argentina who were smart enough to keep all their savings in the USD which ultimately helped them live through the current crisis and even buy homes. When Argentinian pesos went from 11 cents against the dollar (that is $1 would buy you around 9 pesos) to 1.5  cents (68 pesos against $1) people who hung onto their pesos were completely devastated.

USD conversion

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It is not just failing economies like Argentina that were hit by this crisis. India which has been growing at a steady 7% saw its Rupee lose value against the dollar. For instance, $1000 in 2015 would have bought you Rs. 63000 and now you could get Rs. 75000, a total depreciation of 16%.  

Global Reserve and still Scarce

While this is difficult to understand, in spite of printing trillions of dollars, there are many places where there is not enough supply of the US dollar. Whenever economies tank or take a nosedive, governments (and Central Banks) exchange their currency for the US Dollar. This is one of the reasons why the US dollar goes up in value whenever the economies suffer.  This creates a particularly sharp demand for the US dollar.  In addition to this buy pressure, companies that have foreign debts rely heavily on the US dollar to hedge against the exchange rate volatility.  

Here is a snapshot of places where the demand for the US dollar continues to grow (and thus keeping the value of the US dollar intact in spite of reckless printing):

  • Demand for dollars as reserve from Reserve Banks around the world
  • Hedging tool for global settlements
  • Oil transactions
  • Demand for dollars in the failing economies (like Argentina, Venezuela, etc.,)
  • Business Outsourcing companies need access to Dollars to meet their obligations without worrying about the exchange rate fluctuations

That is not even the exhaustive list of demand for the US dollar.  

Strong Arm

The US Dollar continues to be a world reserve not just because the US Dollar has excess demand around the world as we have seen above.  No.  What makes the US Dollar great is the pure muscle that backs the dollar.  

If it was not for the US balancing out the powers of the world, a country like China would have taken over the world.  

The US has been behind many atrocities, that is not debatable, however, would the world be better off being strong armed by a nation that believes in freedom or by a country that fantasizes absolute control?

The answer is not quite simple but I believe the US dollar continues to be the world reserve because of the ‘implicit’ value it represents: massive force that could annihilate any country that goes against it.

It is scary to think about it that way but for our current discussion purposes of why the US Dollar is going to be here longer than other fiats it becomes a valid point of view to have. 

How to access USD from outside the US?

Now that we have convinced ourselves that holding the US Dollar is a good thing let’s move onto the topic at hand.  How do I access the US Dollar if I live outside the US?  Especially if I don’t have a bank (or I don’t want to convert through a bank?)

  • Set up an LLC in the US with a US bank account

If your situation permits, you could open a US LLC in States’ like Delaware and attach a US Bank account and start billing your non-local clients in US denomination.  You could continue to use your local business set up to receive your local fiat for expenditures etc.,  Get expert advice on tax filings, transfer aspects, etc.,

  • Multi-currency account

You could open an account with a service that provides multi-currency accounts.  We think TransferWise has one of the best options that lets you open one account and receive money in multiple currencies.  Once received, you can convert them to your desired currency (in this instance, USD).  Contact the company to see if this service is available in your location.

  • Tap your social circle

See if your friend of a friend has friends who have access to the US Dollar.  This surprising option seems to be least used and yet the one that sometimes proves to be the simplest one.

Stablecoins – Trojan Horse that can bring USD to the masses

Being a crypto outlet we cannot end an article without mentioning how Cryptos can come to rescue.  

Specifically for holding the USD, you could sign up with your local crypto exchange, buy cryptos to convert to Stablecoins or simply purchase stablecoins directly. You could set up recurring purchases each month to stack up your USD reserves.  Do your research before committing to one particular stablecoin.  For instance, in our opinion, USDC seems to be more resilient and reliable than USDT which has always been wrapped in controversy.  Obviously, you will want to make sure that your country has no bans on cryptocurrencies or crypto exchanges in general.

Bitcoin as an hedge

buying more bitcoinPeople use Bitcoin and Gold as hedge against inflation and potential fiat failure, as such, do your due diligence in the matters of whether or not fiat (even USD) is the best ‘savings’ vehicle or if you should think about alternatives like Real Estate, Gold and Bitcoin, depending on your location and what’s legal in your locale.  

Conclusion

Many people around the world are witnessing inflation eat away their fiat savings. The US dollar seems to be more resilient and growing stronger in crisis compared to the other fiat currencies.  Given this predicament, you may want to look at keeping your savings in the USD for a rainy day.  We have laid out a few ways you can stack up the USD outside the US if you choose to do so.

Thank you for reading and sharing this article. Stay safe and healthy!

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